The Closing Bell: Are big banks backing away from small real estate deals?

We created The Closing Bell in April after we figured out IL was sitting on too many biz-news scoops that couldn’t wait for the Monday Business Briefing.

Since then, TCB has become one of our best-read features, because big news and titillating tidbits can’t wait.

We can’t wait for the weekend, which should be one of the first hot, lazy breaks of the summer. Take the rest of the day off and head for Kentucky Kingdom. Tell your CEO The Closing Bell said it’s OK. And if you are the CEO, well, you don’t have to ask.

Big banks balk at smaller loans

We didn’t see this one coming.

The recession is long over and economic activity is returning to pre-2007 levels. So, when insiders started telling us this week that PNC and other big banks are backing away from smaller real estate investment loans in favor of bigger deals, we said, “Are you sure?”

This is not the sexiest area of deal making. Usually these are partnerships that invest in multiple multi-family units, borrowing less than $1 million for each deal. Judicious bank underwriting, together with rising rents, keep both parties happy. That said, small, heavily leveraged investors playing monopoly with duplexes and small apartment complexes, with those loans getting securitized, contributed to the 2008 meltdown so famously captured by Michael Lewis in “The Big Short.”

Anyway, our sources said PNC is notifying investors with loans and mortgages maturing that the bank wouldn’t renew them. We don’t know exactly why. PNC executives told our sources the Pittsburgh-based regional bank will focus on deals in the $15-to$20 million range. In a longer post later today, we’ll tell you who got caught up in this, and who’s benefiting.

Also, our sources say this isn’t just about PNC, but is increasingly a policy with large banks.

A story Primer…

Another big IL scoop coming up today: Melissa Chipman scored the interview no one else on the staff could get … a one-on-one with Cafe Press co-founder Fred Durham. We’ve been hearing tidbits about Durham’s projects from our real estate sources and from our restaurant peeps. Then, we posted in the May 16 Closing Bell that he’d bought the super-strategic Prime Lounge complex at 106 W. Main St. next door to Steve Poe’s planned Aloft Hotel, and directly across from Whiskey Row. Now, we know. Melissa will have a two-parter starting today. Stay tuned!